LONDON – British house prices record another weaker than expected sales in November as Brexit deal weigh on house prices and growth in the UK economy. LONDON – British house prices record another weaker than expected report for November this morning according to figures published by mortgage lender Nationwide on Thursday as Brexit deal weigh on house prices and growth. which has slowed since last year’s Brexit vote, was , House prices rose 2.5 percent on the year, unchanged from the pace of growth in October. The median forecast in a Reuters poll of analysts had predicted house price inflation would pick up to 2.7 percent.
“The annual rate of house price growth remained stable in November at 2.5%. Nevertheless, annual growth remains within the 2-4% range that has prevailed since March. Low mortgage rates and healthy rates of employment growth are providing support for demand, but this is being partly offset by pressure on household incomes, which appears to be weighing on confidence. The lack of homes on the market is providing support to house prices.
“The decision in the Budget to abolish stamp duty (SDLT) for first time buyers purchasing a property up to £300,000 (with relief for those purchasing a property up to £500,000) is likely to have only a modest impact on overall demand. In many regions, first time buyers already paid little or no stamp duty as the price of the typical first time buyer property was below the previous threshold of £125,000.
“The focus on boosting house-building in the Budget is important, as a shortage of homes is a key reason why affordability is so stretched in large parts of the country. A wide range of measures were announced to deliver an additional 300,000 homes per year by the mid-2020s.
“The long timeframe reflects the scale of the challenge ahead, although there have been some encouraging signs that the number of homes has been rising faster than previously thought in recent years.
“Construction of new build properties is still too low – with completions in England over the past 12 months c13% below 2007 levels. But, the picture improves significantly if we add in new dwellings that have been created by converting larger homes into more units and those created by ‘change of use’, such as offices transformed into flats. Indeed, on this broader measure, the number of dwellings being created each year is now only 3% lower than the levels recorded in 2007 (even after accounting for demolitions).
“Interestingly, it is ‘change of use’ of buildings – i.e. from shops, offices and other commercial purposes, to homes – which is providing the biggest boost, driven by a shift in government policy. From 2014, automatic permitted development rights were granted to convert offices into residential properties. Since then, so called ‘change of use’ additions to housing have nearly doubled, from c20,000 in 2006/07 to 37,000 in 2016/17. Of these, about 18,000 were granted under the new permitted development rights.
“This policy change has provided a particularly strong boost to housing supply in London, where the increase in dwellings each year is now 22% higher than at the 2007/08 peak (see chart on the next page).
“In London, homes created by ‘change of use’ accounted over a fifth of new dwellings added in the capital in 2016/17, well above the 16% recorded in the rest of England (i.e. excluding London).
“While across the UK the price of housing and residential land is higher than the price of commercial property and commercial land, in London the gap is sufficiently large to dwarf conversion costs and make the developments very profitable.
“Other cities with expensive housing and limited supply also appear to be benefiting from the policy change. For example, in Bristol, net change of use accounted for the majority of new housing supply in 2016/17, with 1,040 additions from ‘change of use’ versus 900 new builds.
“While this is an encouraging development, we shouldn’t overstate its significance. The growth in ‘change of use’ may well slow in future years, as developers have probably converted the easiest sites and the stock of suitable commercial property will reduce. The quality and long-term suitability of some of these changes of use remains to be seen.
“Therefore, while the recent data is encouraging, there is still a lot that remains to be done in tackling the UK’s housing supply issues. For this reason, the focus in the Budget on increasing supply of homes in the year ahead was encouraging.”
On the month, prices rose 0.1 percent, slowing from an increase of 0.2 percent in October, Nationwide said. The Reuters poll had predicted a monthly increase of 0.2 percent.
In conclusion, while the Brexit deal continues to falter the uncertainty looming over business future and personal finances will not wane. This was certainly not a future many brexitiers would have voted for.